Rate Cuts Continue: Fed Holds Steady on Future Hikes Amid Persistent Inflation Concerns

The Federal Reserve has completed its third consecutive interest rate reduction this year, bringing the benchmark rate down to a range of 3.5% to 3.75%. However, the narrowing path forward became clear as policymakers signaled just one additional cut is likely to materialize through 2026—a notably hawkish stance despite the move downward.

The decision revealed cracks within the central bank, with both inflation hawks resisting any reduction and at least one dovish member advocating for a steeper 50-basis-point move. With inflation persistently hovering above the Fed’s 2% target, officials justified the cautious outlook by pointing to a gradual softening in labor market conditions rather than any breakthrough on price pressures.

Market Dynamics Paint a Mixed Picture

Equity markets showed modest resilience following the announcement. The S&P 500 edged up 0.34%, while the Dow Jones Industrials climbed 0.67%, and the Nasdaq 100 remained virtually flat at -0.01%. Support emerged from early signals suggesting wage growth may be easing—a dovish tailwind for policy. The Q3 employment cost index rose just 0.8% quarter-over-quarter, slightly below the forecasted 0.9%, offering some relief on inflation expectations.

Meanwhile, longer-duration assets benefited from this moderation in wage pressures. March 10-year Treasury notes rallied 2 ticks, with yields declining 2.2 basis points to 4.166%, as the market reassessed inflation trajectories. Treasury futures had initially faltered on fears the divided FOMC would signal extended rate hikes, but shifted direction as employment data proved softer than anticipated.

Earnings Season Shows Strength Despite Economic Headwinds

Corporate America delivered impressive Q3 results, with 495 of 500 S&P 500 companies now having reported. An estimated 83% of reporters beat forecasts—tracking toward the strongest quarter since 2021. Aggregate earnings growth hit 14.6%, more than double the anticipated 7.2%, signaling resilience beneath surface-level economic concerns.

Housing and Credit Markets React

Mortgage activity picked up steam in the latest week. Mortgage applications surged 4.8%, though purchase activity softened with the purchase index down 2.4%, offset by a 14.3% jump in refinancing activity. The average 30-year fixed rate mortgage edged up 1 basis point to 6.33%, reflecting the mixed signals emanating from policy and growth data.

Global Markets Trail U.S. Strength

International equities lagged their American counterparts. Europe’s Euro Stoxx 50 declined 0.21%, while China’s Shanghai Composite fell 0.23%. Japan’s Nikkei 225 retreated 0.10% from recent highs. European bond yields moved higher, with the German 10-year bund reaching an 8.75-month peak of 2.895%, underpinned by more hawkish commentary from ECB leadership suggesting potential upgrades to growth forecasts.

Individual Stock Movers Signal Sector Rotation

Amazon’s expansion of same-day grocery delivery to over 2,300 cities pressured mobile delivery competitors. Maplebear (CART) fell 6%, Uber (UBER) declined 4%, and DoorDash (DASH) dropped 4%.

Cryptocurrency-linked equities faced headwinds as Bitcoin traded down nearly 1% at $87.62K (-2.46%). MARA Holdings shed 3%, while Galaxy Digital Holdings (GLXY), Riot Platforms (RIOT), MicroStrategy (MSTR), and Coinbase Global (COIN) each lost between 1-2%.

On the positive side, Photronics (PLAB) surged 42% following stronger-than-expected Q4 results and forward guidance. GE Vernova (GEV) jumped 9% on a $10 billion buyback authorization and doubled dividend. EchoStar (SATS) rose 5% on a Morgan Stanley upgrade, while Middleby Corp. (MIDD) gained 5% following a Jeffries upgrade.

Weakness emerged in select names: AeroVironment (AVAV) fell 10% after cutting 2026 guidance, GameStop (GME) dropped 6% on declining Q3 sales, and T Rowe Price Group (TROW) retreated 3% on reduced assets under management.

Economic Calendar Ahead

Weekly initial unemployment claims are forecast to rise to 220,000 in the coming report, adding another data point to the Fed’s assessment of labor market slack. With earnings season nearing completion, attention will increasingly shift to forward-looking economic indicators and Fed communications on the 2026 rate path.